The Internet of Materials (IoM)

Sandra Aguilar & Christopher Bruce, Founder, endswapper  Headquartered in California, endswapper enables businesses to maximize material value, utility, and sustainability through its suite of digital solutions in the areas of Internet of Materials, Blockchain, Circular Economies, Open-source, AI, and many others.

Materials are the essential matter of things, in part, defining societies and cultures. The stone, iron and bronze ages reflect the importance of materials and the fundamental necessity of materials in daily life. While, today, we live in an information age, materials are no less fundamental.

The importance of materials offers a primary, objective basis for material sustainability. As consumers, we are all stakeholders, and we suggest a universal responsibility for resources and their environmental stewardship. From an enterprise perspective, improved financial performance and risk management performance provides profit based incentives for material sustainability within the supply chain. Further more, sustainability, as a catalyst for innovation, and a basis to engage and connect with consumers, completes the business case for material sustainability.

The following discussion of materials seeks to emphasize the magnitude of the global materials industry and the gaps in material stewardship, e.g. landfilling materials with unrealized value and/or utility. In light of recent and ongoing discussions regarding relative material sustainability, we think it is worth noting that we do not identify or advocate material preferences. We advocate for data and innovation. Relative material sustainability is a moving target. Considerations such as water, energy and technology can have swift and significant impact on the relative sustainability of materials.

The global import/export value of materials is almost $3.5 trillion annually. Total tonnage is in excess of two billion tons annually. For plastic alone,recent research estimates that 8.3 billion metric tons of plastic have ever been produced with about 30 percent still in use and 9 percent having been recycled. Plastics and metals represent the majority of value and metal and paper represent the greatest tonnage with more than 1.6 billion tons and 400 million metric tons respectively.

To provide some additional perspective, most materials will spend some time on a truck, some where in the supply chain, even if the primary transportation mode is air, marine or railway. Using 40,000 pounds as a truckload and a little more than 2.4 billion tons in annual materials, that would equal more than 122 million truckloads. If placed end-to-end, the trucks would circle the earth 1.75 times. We remind the reader that this is an annual measure.

Globally, municipal solid waste (MSW) is estimated at more than 1.3 billion tons annually, with an estimated cost of more than $205 billion. An estimated two million people act as informal waste pickers contributing to international markets for recycling. The top twenty-five countries for MSW recyclers highlights how much room there is to improve recycling rates globally. Germany at the top of the list has a recycling rate of 66.1 percent, only the top ten exceed 50 percent, and the U.S. rate, last on the list, is a disappointing 34.6 percent.
Overall, U.S. MSW in 2014 was in excess of 250 million tons with more than half going to landfills. Paper, glass, metal and plastic, all of which are highly recyclable, accounted for 47.4 percent (14.3 percent, 5.2 percent,9.4 percent and 18.5 percent, respectively) of the total weight landfilled.

The purpose of the Internet of Materials(IoM)is to maximize material utility,value and sustainability by reducing transaction friction and facilitating the global trade of materials

The orchestration of material markets, consisting of billions of tons of materials, both upstream and downstream, delivered through multiple modes of transportation around the world is complex enough. It is compounded when considering the various systems and software, often proprietary and expensive that power the modern customer and supplier enterprises. Complexity not only drives costs, but can do further damage by hindering innovation.

Sandra Aguilar, Founders, endswapper

Further more, a complete material transaction requires payment processing, which adds yet another layer of complexity. While this concern is not unique to materials markets there are distinct challenges with materials. First, materials are often a narrow margin business, which limits the use of credit cards and similar electronic payments with significant fees. Second, it is very common to have cross-border transactions. In part, this is why we emphasize the import/export value of materials totaling trillions of dollars in the preceding paragraphs. Third, material transactions can be large. A container or railcar of material might cost more than $50,000 or $100,000, and a large customer might purchase ten containers/railcars or more at once, driving the transaction value over $1,000,000. Finally, currently used payment methods such as letter of credit, checks and wires are cumbersome, contributing to in efficiency and adding costs.

Research on informational friction in commodity markets by Sockin and Xiong, and joint pricing and inventory control models by Yao, demonstrate that improved, trustworthy data - reality, versus a model of reality - improves operational efficiencies, reduces risk and optimizes profit. Supply chain operating networks (SCONs) and supply chain on blockchain are evolutionary contributions building on existing supply chain platforms leveraging the wealth of data generated by the modern enterprise. The primary benefit of these approaches is improved data. Typically, the SCON or blockchain is owned by the platform in which it is integrated. From the perspective of the supply chain platform this provides a competitive advantage and a fair value to their customers. However, considered objectively, this approach creates inherent market friction due to costs and technological barriers.

The overall cost and complexity of supply chain platforms, integrations, and the development and implementation of pricing and supply models, makes them prohibitive to all but the largest participants. This again creates inherent friction for materials markets because the overall reach and power of this information and technology is limited to participants who can afford it. The result is a technology proliferation race at the expense of enterprise core competencies and material utility, value and sustainability.

In other words,if software eats materials, we all lose - the customer and supplier enterprises, the consumer and the environment. The purpose of the Internet of Materials(IoM)is to maximize material utility, value and sustainability by reducing transaction friction and facilitating the global trade of materials.

By aligning all stakeholders - consumers, enterprises and even materials themselves - we identify a path for global material sustainability. Through a combination of technologies, and a basis in free and open-source software we make the path accessible for everyone. The Internet of Materials drives growth and efficiency, supporting material utility, value and sustainability. Not only is the IoM a self-sustaining mechanism for material sustainability, but also the necessary next frontier to realize the promise of Industry 4.0.